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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TradeStation Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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TRADESTATION GROUP, INC.
8700 WEST FLAGLER STREET
MIAMI, FLORIDA 33174
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 2001
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To Our Shareholders:
The 2001 annual meeting of shareholders (the "Annual Meeting") of
TradeStation Group, Inc. (the "Company") will be held on Monday, June 18, 2001,
at 10:00 a.m., local time, at the Miami Airport Marriott, 1201 N.W. LeJeune
Road, Miami, Florida 33126, for the following purposes:
1. To elect eight directors of the Company to serve for a
one-year term expiring in 2002;
2. To approve an amendment to the Company's Nonemployee Director
Stock Option Plan increasing the number of shares of the
Company's common stock, $.01 par value, reserved for issuance
under such plan from 175,000 to 350,000, subject to any
further antidilution adjustments, and increasing the number of
shares included in the options automatically granted to a
nonemployee director upon each annual reelection from 3,000 to
7,000;
3. To ratify the selection of Arthur Andersen LLP as the
Company's independent public accountants for the year ending
December 31, 2001; and
4. To transact such other business as may properly come before
the Annual Meeting or any postponement or adjournment thereof.
The Board of Directors has fixed Friday, May 11, 2001, as the record
date for the determination of shareholders entitled to vote at the Annual
Meeting. Only shareholders of record at the close of business on that date will
be entitled to notice of, and to vote at, the Annual Meeting or any postponement
or adjournment thereof.
Copies of the Company's Proxy Statement and annual report for the year
ended December 31, 2000 accompany this notice.
You are cordially invited to attend the meeting in person. Whether or
not you expect to attend the meeting in person, you are urged to sign and date
the enclosed proxy and return it promptly in the envelope provided for that
purpose.
By Order of the Board of Directors
/s/ Marc J. Stone
-----------------------------------
Marc J. Stone
Secretary
Miami, Florida
May 18, 2001
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TRADESTATION GROUP, INC.
8700 WEST FLAGLER STREET
MIAMI, FLORIDA 33174
PROXY STATEMENT
INTRODUCTION
GENERAL
This Proxy Statement, which, together with the accompanying proxy card,
is first being mailed to shareholders on or about May 21, 2001, is furnished to
the shareholders of TradeStation Group, Inc. (the "Company") in connection with
the solicitation of proxies by the Board of Directors (sometimes referred to as
the "Board") of the Company for use in voting at the 2001 annual meeting of
shareholders (the "Annual Meeting"), including any adjournment or postponement
thereof. Please note that, with respect to dates and periods prior to December
29, 2000, the "Company" means Omega Research, Inc., the publicly-traded
predecessor company to TradeStation Group, Inc. TradeStation Group, Inc. became
the successor publicly-traded company as a result of the December 29, 2000
combination by merger of Omega Research, Inc. and onlinetradinginc.com corp. As
part of that merger, Omega Research (which has been renamed TradeStation
Technologies, Inc.) and onlinetradinginc.com (which has been renamed
TradeStation Securities, Inc.) became wholly-owned operating subsidiaries of
TradeStation Group, Inc.
The cost of this solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
e-mail, facsimile or other means by officers and/or regular employees of the
Company without additional compensation or remuneration therefor. Arrangements
have also been made with brokers, dealers, banks, voting trustees and other
custodians, nominees and fiduciaries to forward proxy materials and annual
reports to the beneficial owners of the shares held of record by such persons,
and the Company will, upon request, reimburse them for their reasonable expenses
in so doing.
A copy of the Company's annual report for the fiscal year ended
December 31, 2000 (which has included therein audited financial statements for
the Company for the three fiscal years ended December 31, 2000) is being mailed
to the Company's shareholders together with this Proxy Statement. Such annual
report is not, however, incorporated into this Proxy Statement nor is it to be
deemed a part of the proxy soliciting material.
VOTING PROCEDURES
Proxies in the form enclosed, if properly executed and received in time
for voting and not revoked, will be voted as directed in accordance with the
instructions thereon. In voting by proxy in regard to the election of eight
directors to serve until the 2002 annual meeting of shareholders, shareholders
may vote in favor of all nominees or withhold their votes as to all or as to any
specific nominees. In voting by proxy in regard to (i) the approval of an
amendment to the Company's Nonemployee Director Stock Option Plan (the
"Nonemployee Director Stock Plan") increasing the number of shares of the
Company's common stock, $.01 par value ("Common Stock"), reserved for issuance
under, and increasing the number of shares included in the options automatically
granted to a nonemployee director (an "Independent Director") upon each annual
reelection pursuant to, the Nonemployee Director Stock Plan and (ii)
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ratification of the selection of Arthur Andersen LLP as the Company's
independent public accountants, shareholders may vote for or against or abstain
from voting. Any properly executed and timely received proxy not so directing or
instructing to the contrary will be voted FOR (i) each of the Company's nominees
as directors, (ii) approval of the amendment increasing the number of shares
reserved for issuance under, and increasing the number of shares included in the
options automatically granted to an Independent Director upon each annual
reelection pursuant to, the Nonemployee Director Stock Plan, and (iii)
ratification of the selection of Arthur Andersen LLP. See Proposals 1, 2 and 3
herein. Sending in a signed proxy will not affect a shareholder's right to
attend the meeting and vote in person since the proxy is revocable. Any
shareholder giving a proxy may revoke it at any time before it is voted at the
Annual Meeting by, among other methods, giving notice of such revocation to the
Secretary of the Company, attending the Annual Meeting and voting in person or
by duly executing and returning a proxy bearing a later date.
The management knows of no other matters to be presented for action at
the Annual Meeting other than as mentioned herein. However, if any other matters
come before the Annual Meeting, the holders of the proxies intend to vote in
such manner as they decide in their sole discretion.
VOTING SECURITIES
At the close of business on Friday, May 11, 2001, the record date for
the determination of shareholders entitled to receive notice of and to vote at
the meeting (the "Record Date"), the Company's outstanding voting securities
consisted of 44,483,433 shares of Common Stock. Holders of Common Stock are
entitled to one vote per share.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the Record Date, by (i)
each person who is known to the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors and nominees for
directors who own shares of Common Stock, (iii) the Company's Co-Chief Executive
Officers, its four most highly-compensated executive officers and one former
executive officer (each of whom are included in the Executive Compensation
Tables included in this Proxy Statement) and (iv) all directors and executive
officers of the Company as a group. Except as otherwise described in the
footnotes and in "Voting Trust" below, the Company believes that the beneficial
owners of the Common Stock listed below, based on information provided by such
owners, have sole investment and voting power with respect to such shares.
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SHARES BENEFICIALLY OWNED (1)
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NAME OF BENEFICIAL OWNER (1) NUMBER PERCENT
---------------------------- -------------- -------------
William R. Cruz (2)(7)........................... 9,267,654 20.8%
Ralph L. Cruz (3)(7)............................. 9,156,554 20.6%
Benedict Gambino (7)............................. 4,680,960 10.5%
Farshid Tafazzoli (4)(7)......................... 4,680,960 10.5%
Andrew Allen (5)(7).............................. 4,356,960 9.8%
E. Steven zum Tobel (6)(7)....................... 763,199 1.7%
Salomon Sredni................................... 220,750 *
Marc J. Stone (7)................................ 128,000 *
Charles F. Wright (8)............................ 85,600 *
Lothar Mayer..................................... 38,637 *
Brian D. Smith................................... 26,000 *
Stephen C. Richards.............................. 22,333 *
All executive officers and
directors as a group (13 persons)(7)(9) 24,476,842 54.4%
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* Less than 1%.
(1) The address of: William R. Cruz and Ralph L. Cruz is TradeStation Group,
Inc., 8700 West Flagler Street, Miami, Florida 33174; Benedict Gambino is
22356 Timberlea Lane, Kildeer, Illinois 60047; Farshid Tafazzoli is
TradeStation Securities, Inc., 2700 North Military Trail, Boca Raton,
Florida 33431; and Andrew A. Allen is 4939 N.W. 23rd Court, Boca Raton,
Florida 33431. Beneficial ownership is determined in accordance with the
rules of the SEC that deem shares to be beneficially owned by any person
who has or shares voting or investment power with respect to such shares.
Includes options held by executive officers and/or directors which are
exercisable within 60 days of the Record Date.
(2) All but 100 shares are held by two Texas limited partnerships as to which
William R. Cruz possesses sole voting and dispositive powers through his
direct and/or indirect 100% ownership of the sole general partner of each
of such limited partnerships. In one limited partnership William R. Cruz
is the sole limited partner and in the other limited partnership William
R. Cruz and a grantor retained annuity trust for the benefit of William
R. Cruz and his family are the limited partners. Does not include 900
shares owned by the spouse of William R. Cruz with respect to which Mr.
Cruz disclaims beneficial ownership.
(3) The shares are held by two Texas limited partnerships as to which Ralph
L. Cruz possesses sole voting and dispositive powers through his direct
and/or indirect 100% ownership of the sole general partner of each of
such limited partnerships. In one limited partnership Ralph L. Cruz is
the sole limited partner and in the other Ralph L. Cruz and his spouse
are the limited partners.
(4) The shares are held by Tafazzoli Family Limited Partnership as to which
Farshid Tafazzoli possesses sole voting and dispositive powers through
his 100% ownership of the sole general partner of such limited
partnership.
(5) Includes 3,969,000 shares held by Andrew A. Allen Family Limited
Partnership as to which Andrew A. Allen possesses sole voting and
dispositive powers through his 100% ownership of the sole general partner
of such limited partnership.
(6) The shares are held by zum Tobel Family Limited Partnership as to which
E. Steven zum Tobel possesses sole voting and dispositive powers through
his 100% ownership of the sole general partner of such limited
partnership.
(7) Shares of Common Stock are subject to the terms of a voting trust entered
into in conjunction with the merger of TradeStation Technologies and
TradeStation Securities. See "Voting Trust" below.
(8) 5,000 of the shares of Common Stock are held by Mr. Wright (a nominee for
director) as custodian for his son.
(9) See other footnotes above.
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VOTING TRUST
In connection with entering into the merger, certain former
shareholders of TradeStation Technologies and TradeStation Securities entered
into a voting trust agreement effective as of December 29, 2000 pursuant to
which certain shares of Common Stock of TradeStation Group owned by them are
subject to the terms of a voting trust. The former shareholders of TradeStation
Technologies who entered into the voting trust agreement are Texas limited
partnerships beneficially owned by William R. Cruz and Ralph L. Cruz
(collectively, the "Cruz Group"). The Cruz Group collectively holds as of the
Record Date an aggregate of 18,313,108 shares of Common Stock that are subject
to the voting trust agreement, representing approximately 41.2% of the
outstanding shares of TradeStation Group's Common Stock. The former shareholders
of TradeStation Securities who entered into the voting trust agreement are
Andrew A. Allen, Andrew A. Allen Family Limited Partnership, Tafazzoli Family
Limited Partnership, zum Tobel Family Limited Partnership, Derek J. Hernquist
and Benedict S. Gambino (collectively, the "Online Group"). The Online Group
collectively holds as of the Record Date an aggregate of approximately
14,939,997 shares of Common Stock that are subject to the voting trust
agreement, representing approximately 33.6% of the outstanding shares of
TradeStation Group's Common Stock. The parties to the voting trust agreement
have agreed that, during the term of the voting trust agreement, the voting
trustee, Marc J. Stone, is required with respect to shares of TradeStation
Group's Common Stock subject to the voting trust to vote and abstain from voting
or otherwise to participate in shareholder actions, including executing written
consents, in all matters relating to TradeStation Group subject to and limited
by and as directed pursuant to the voting trust agreement.
The Cruz Group has the right to direct the voting trustee to vote all
of the shares subject to the voting trust in a manner such that five of the
total of eight directors constituting TradeStation Group's Board of Directors,
two of whom are required to be Independent Directors, are designated by the Cruz
Group. The Online Group has the right to direct the voting trustee to vote all
of the shares subject to the voting trust in a manner such that three of such
total number of eight directors, one of whom is required to be an Independent
Director, are designated by the Online Group. In the event that the number of
directors constituting TradeStation Group's Board of Directors is increased or
decreased, then each group of shareholders will be entitled to designate its
number of the total number of directors based upon a ratio of 62.5% for the Cruz
Group shareholders and 37.5% for the Online Group. If the foregoing ratio yields
other than whole numbers as to the number of directors for which each group of
shareholders is entitled to designate the shares to be voted, then the number of
directors which each such group is entitled to designate shall be rounded down
to the nearest whole number, and the one remaining directorship that this
rounding down will create shall be designated by the Cruz Group.
With respect to all matters other than the election of directors as to
which a vote (or written consent) of shareholders of TradeStation Group will be
made, the voting trustee will vote the shares owned by each shareholder who is a
party to the voting trust agreement as specifically instructed in writing by the
shareholder owning the beneficial interest in, and voting trust certificate
relating to, such shares. In the event that the voting trustee does not timely
receive such written voting instructions, in whole or in part, from a
shareholder, then the voting trustee shall abstain from voting the shares owned
by such shareholder with respect to any or all matters as to which the voting
trustee has not received written voting instructions.
The voting trust shall dissolve on the earliest of the following dates:
(i) December 29, 2002; (ii) the date when the voting trustee shall resign in
writing unless such vacancy is timely filled as provided under the voting trust
agreement; (iii) the date when the shareholders who are parties to the voting
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trust agreement holding 67% or more of the shares then subject to that agreement
shall execute a written instrument so declaring; or (iv) the date when less than
75% of the aggregate number of shares owned as of December 29, 2000 by either
the Cruz Group or the Online Group remains subject to the voting trust.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their
respective ages and positions with the Company as of the date of this Proxy
Statement are as follows:
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
William R. Cruz 40 Co-Chairman of the Board and Co-Chief Executive Officer
Ralph L. Cruz 37 Co-Chairman of the Board and Co-Chief Executive Officer
Salomon Sredni 33 President and Chief Operating Officer and Director
Sean M. Davis 35 Vice President of Investor and Media Relations
David H. Fleischman 55 Chief Financial Officer, Vice President of Finance and Treasurer
Lothar Mayer (1) 61 Director
Janette Perez 43 Vice President of Advertising
Stephen C. Richards (1)(2) 47 Director
Roger L. Shaffer 34 Vice President of Brokerage Compliance
Brian D. Smith (1)(2) 56 Director
Marc J. Stone 40 Vice President of Corporate Development, General Counsel and Secretary
Farshid Tafazzoli 28 Vice President of Brokerage Technology and Director
E. Steven zum Tobel 34 Vice President of Brokerage Operations and Director
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(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
The directors hold office until the next annual meeting of
shareholders. Executive officers serve at the discretion of the Board of
Directors.
WILLIAM R. CRUZ co-founded the Company with his brother, Ralph Cruz, in
1982 and has been a director since that time. He served as President from 1982
to September 1999. Mr. Cruz was appointed Co-Chairman of the Board and Co-Chief
Executive Officer of the Company in 1996. Mr. Cruz studied classical violin at
the University of Miami, which he attended on a full scholarship, and the
Juilliard School of Music, during which time he won numerous classical violin
competitions. Mr. Cruz has been primarily responsible for the conception and
management of the Company's products and product strategies.
RALPH L. CRUZ co-founded the Company in 1982 and has been a director
since that time. Mr. Cruz was Vice President of the Company from 1982 until
1996, at which time he was appointed Co-Chairman of the Board and Co-Chief
Executive Officer. In December 2000, Mr. Cruz became a director of TradeStation
Securities, Inc., one of the Company's operating subsidiaries. Mr. Cruz studied
classical violin at the University of Miami, which he attended on a full
scholarship, and Indiana University, during which time he won numerous classical
violin competitions. Mr. Cruz historically has been responsible for the
Company's marketing strategies.
SALOMON SREDNI joined the Company in December 1996 as its Vice
President of Operations and Chief Financial Officer and was named Treasurer and
a director of the Company in July 1997. In August 1999, he was named President
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and Chief Operating Officer. Mr. Sredni also serves as a director of each of the
Company's operating subsidiaries. Before joining the company, Mr. Sredni was
Vice President of Accounting and Corporate Controller at IVAX Corporation, a
publicly-held pharmaceutical company, from August 1994 to November 1996. Prior
to that time, from January 1988 to August 1994, Mr. Sredni was with Arthur
Andersen LLP, an international accounting firm. Mr. Sredni is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants and the Florida Institute of Certified Public Accountants. He has a
bachelor's degree in Accounting from The Pennsylvania State University.
SEAN M. DAVIS was appointed to his current position for the Company,
Vice President of Investor and Media Relations, in 2000, after the Company
acquired his previous employer, Window On WallStreet Inc. Mr. Davis joined
Window On WallStreet in 1995 and served as Senior Vice President, Marketing &
Business Development, from 1998 to 1999, Vice President from 1996 to 1998, and
Managing Director from 1995 to 1996. From 1994 to 1995, Mr. Davis was Channel
Sales Manager at American Power Conversion. From 1988 to 1994, Mr. Davis was
employed in corporate sales in the computer industry for several companies. Mr.
Davis has an Executive MBA from the University of Rhode Island with an emphasis
in management, and a bachelor's degree from Vassar College with an emphasis in
computer science.
DAVID H. FLEISCHMAN joined the Company as Chief Financial Officer, Vice
President of Finance and Treasurer on February 1, 2001. Prior to joining the
Company, Mr. Fleischman was engaged as a Director of Crossroads LLC, a firm that
provides financial and management expertise and services to companies seeking to
maximize the efficiencies and performance of their management teams. From
January 1997 until September 2000, Mr. Fleischman served as Senior Vice
President, Chief Financial Officer and member of the Board of Advisors of The
SeaSpecialties Group. From 1992 to 1996, he served as Senior Vice President and
Treasurer of The Kislak Organization - J.I. Kislak, Inc., an organization that,
during those years, included the largest privately-held mortgage-banking company
in the United States. From 1983 to 1992, Mr. Fleischman served as a Director,
Vice President and Chief Financial Officer of the U.S. group of Berisford
International plc, a publicly-held United Kingdom company. From 1969 to 1983, he
held several positions with subsidiaries of Midland Bank plc, including London
American Finance Corporation and Drake America Corporation. He began his career
in 1967 in the audit division of a predecessor firm of Ernst & Young. Mr.
Fleischman has a bachelor's of science degree in accounting from The New York
Institute of Technology.
LOTHAR MAYER became a director of the Company and a member of the Audit
Committee of the Board of Directors in December 2000. Prior to that, he served
as a director of TradeStation Securities (then known as onlinetradinginc.com
corp.). Mr. Mayer is the President of Liberty Hardware Mfg. Corp., a subsidiary
of Masco Corp. (NYSE: MAS). He has held this position for over 23 years. He
owned Liberty Hardware until its sale to Masco. Mr. Mayer is also a chartered
and certified public accountant.
JANETTE PEREZ joined the Company in 1996 as Director of Public
Relations, and was named Vice President of Marketing (the title ultimately
changing to Vice President of Advertising) in June of 1998. Since 1998, Ms.
Perez has been responsible for the organization and management of the Company's
marketing campaigns. Prior to joining the Company, Ms. Perez served for 15 years
as a manager for Simon Bolivar International, a specialty advertising firm.
STEPHEN C. RICHARDS is Executive Vice President and Chief Financial
Officer of Network Associates, Inc. (Nasdaq: NETA), a provider of network
security and availability solutions for e-business. Previously he served as
Chief Online Trading Officer of E*TRADE Group, Inc., a position he held from
March 1999 to June 2000. From 1998 to February 1999, Mr. Richards served as
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Senior Vice President, Corporate Development and New Ventures at E*TRADE,
following two years as E*TRADE's Senior Vice President of Finance, Chief
Financial Officer and Treasurer. Prior to joining E*TRADE in April 1996, Mr.
Richards was Managing Director and Chief Financial Officer of Correspondent
Clearing at Bear Stearns & Companies, Inc., where he was employed for more than
11 years. He is also a former Vice President/Deputy Controller of Becker
Paribas, and former First Vice President/Controller of Jefferies and Company,
Inc. Mr. Richards also serves as a director of McAfee.com Corporation (Nasdaq:
MCAF), a provider of online PC management products and services, and Archipelago
LLC, a leading electronic communication network (ECN). He received a Bachelor of
Arts in Statistics and Economics from the University of California at Davis and
an MBA in Finance from the University of California at Los Angeles. Mr. Richards
is a Certified Public Accountant. Mr. Richards became a director of the Company
in August 1999, at which time he was also elected to the Compensation Committee
and the Audit Committee of the Board of Directors. He serves as Chairman of the
Audit Committee.
ROGER L. SHAFFER was appointed Vice President of Brokerage Compliance
of the Company in December 2000. Prior to that, commencing June 1999, he served
as General Counsel and Vice President of Business Development of TradeStation
Securities. From May 1995 to June 1999, Mr. Shaffer was a partner in the law
firm of Shaffer & Shaffer, P.A., where he limited his practice to business and
corporate transactions. Prior to that time, from 1988 to 1992, Mr. Shaffer was
an assistant controller for various privately held companies within the real
estate and securities industries. Mr. Shaffer received his law degree from the
University of Miami School of Law, being conferred cum laude, and received his
bachelor's degree in finance from Florida Atlantic University, graduating with
honors.
BRIAN DOUGLAS SMITH, currently retired, served from 1990 to 1996 as
President of Data Broadcasting Corporation (DBC), a leading provider of
financial market data services to the individual investor market. Prior to
becoming President of DBC, Mr. Smith, since 1983, held several key positions
with DBC and its predecessor companies. Prior to that, Mr. Smith worked for 13
years for General Electric Company in engineering, sales and management
positions, and for Texas Instruments in engineering. Mr. Smith also served as
Chief Executive Officer of Mobile Broadcasting Corp., a wireless communications
company, from December 1996 to December 1997. Mr. Smith became a director of the
company in December 1997, and was elected to the Compensation Committee and the
Audit Committee of the Board of Directors in January 1998. Mr. Smith is retiring
from his service to the Board and, therefore, has not been slated for
reelection.
MARC J. STONE joined the Company in May 1997 as its Vice President of
Corporate Development, General Counsel and Secretary. In December 2000, Mr.
Stone became a director of TradeStation Securities, and continues as a director
of TradeStation Technologies. From January 1993 to May 1997, Mr. Stone was a
partner at a predecessor law firm of Bilzin Sumberg Dunn Baena Price & Axelrod
LLP, which currently serves as the company's regular outside counsel. Prior to
that time, from 1985 to 1992, Mr. Stone was an associate with that predecessor
law firm. Mr. Stone is of counsel to Bilzin Sumberg. Mr. Stone has bachelor's
degrees in English and American Literature and Theatre Arts and Dramatic
Literature from Brown University, and received his law degree from University of
California (Boalt Hall) School of Law at Berkeley. Mr. Stone is a member of the
Bar of the State of New York, The Florida Bar, the American Bar Association and
the New York State Bar Association.
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FARSHID TAFAZZOLI became a director and Vice President of Brokerage
Technology of the Company in December 2000, and continues as a director of its
operating subsidiary, TradeStation Securities. Prior to that, Mr. Tafazzoli
served as a director and Chief Information Officer of onlinetradinginc.com
corp., the securities brokerage firm that he co-founded in September 1995 and
that is now owned by the Company. Mr. Tafazzoli has over six years experience as
a systems specialist in the brokerage industry, including positions with Spear,
Leads and Kellogg and Gulfstream Partners. Mr. Tafazzoli has a Bachelor of
Science degree in Administrative Studies from Nova Southeastern University.
E. STEVEN ZUM TOBEL became a director and Vice President of Brokerage
Operations of the Company in December 2000, and serves as a director of its
operating subsidiaries. Prior to December 2000, Mr. zum Tobel served as a
director and President of onlinetradinginc.com corp., the securities brokerage
firm acquired by the Company. Mr. zum Tobel has been with TradeStation
Securities since March 1998. Mr. zum Tobel has over 12 years experience in the
brokerage industry with areas of expertise in financial reporting, compliance
and operations, including serving from September 1996 to February 1998 as
managing partner of zum Tobel and Ling, LLP, an audit and tax practice
specializing in the brokerage industry, and from December 1994 to August 1996 as
Vice President of Securities Consultants International LLC, a national brokerage
consulting firm. Mr. zum Tobel is a Certified Public Accountant. He has a
bachelor's degree in Finance and an MBA with a concentration in Finance from
Florida Atlantic University.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held five meetings and acted by
unanimous written consent in lieu of a meeting four times during the fiscal year
ended December 31, 2000.
Effective as of the closing of the December 29, 2000 merger, three
Independent Directors, Brian D. Smith, Stephen C. Richards and Lothar Mayer,
have served on the Board of Directors of TradeStation Group. All three serve as
members of the Audit Committee of the Board of Directors. The Audit Committee's
responsibilities and other matters related to the Audit Committee are discussed
in "Audit Committee Report" below.
Messrs. Richards and Smith also serve on the Compensation Committee of
the Board of Directors. The Compensation Committee determines executive
officers' salaries and bonuses and administers the Company's Incentive Stock
Plan and Employee Stock Purchase Plan. The Compensation Committee held five
meetings and the Co-Chief Executive Officers acted on behalf of the Compensation
Committee five times during the fiscal year ended December 31, 2000.
During 2000 prior to the merger, Messrs. Smith and Richards, and
Salomon Sredni, the President and Chief Operating Officer of the Company, served
on the Audit Committee, and Messrs. Smith and Richards served on the
Compensation Committee, of the Company's Board of Directors.
The Board of Directors does not currently have a nominating committee
or a committee that performs similar functions.
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DIRECTORS' COMPENSATION
The Company's Independent Directors receive $750 for attendance at each
meeting of the Board of Directors and each committee thereof, with an additional
$150 paid to the Chairman of the committee. Pursuant to the Nonemployee Director
Stock Plan, each Independent Director also receives an option to purchase up to
75,000 shares of Common Stock upon initial election as a director of the Company
as determined by the Company's Board of Directors at such time, and, subject to
the proposed amendment, an option to purchase 3,000 shares of Common Stock upon
each re-election as an Independent Director at the Company's annual meeting of
shareholders. See "EXECUTIVE COMPENSATION - Other Compensation
Arrangements--Nonemployee Director Stock Option Plan." All directors may also be
reimbursed for certain expenses in connection with attendance at Board of
Directors and committee meetings. Other than with respect to reimbursement of
expenses, directors who are employees or officers of the Company do not receive
additional compensation for service as a director. In connection with the
election of a new Independent Director to replace Mr. Smith, it is contemplated
that such new director will receive an option to purchase 25,000 shares of
Common Stock upon and subject to his election as a director of the Company at
the Annual Meeting. See Proposal 1 - "ELECTION OF DIRECTORS." The vesting of Mr.
Smith's options will, pursuant to the applicable provisions of the Nonemployee
Director Stock Plan and resolutions authorized by the Board of Directors, be
100% accelerated upon his retirement from the Board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the SEC.
Officers, directors and greater than ten percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on review of the copies of such forms furnished to the
Company and the Company's understanding that no Forms 5 were required, the
Company believes that during the fiscal year ended December 31, 2000 all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were satisfied.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of the Company is
composed of three Independent Directors, Stephen C. Richards (Chairman), Brian
D. Smith and Lothar Mayer, and operates under a written charter adopted by the
Board which is attached as Appendix A to this Proxy Statement. Prior to the
December 29, 2000 merger, Salomon Sredni, President and COO of the Company,
served on the Audit Committee until replaced by Mr. Mayer upon closing of the
merger. The Audit Committee held four meetings during fiscal year 2000. The
Board and the Audit Committee believe that the Audit Committee's current member
composition satisfies the rule of the National Association of Securities
Dealers, Inc. that governs audit committee composition, including the
requirement that audit committee members all be "independent directors" as that
term is defined by NASD Rule 4200(a)(14). The Audit Committee oversees the
Company's financial reporting process on behalf of the Board and reviews the
independence of the Company's auditors.
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Management is responsible for the Company's financial statements,
systems of internal control and the financial reporting process. The independent
auditors are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards and to issue a report thereon. The Audit Committee's responsibility is
to monitor and oversee these processes.
The Audit Committee has implemented procedures to ensure that during
the course of each fiscal year it devotes the attention it deems necessary or
appropriate to fulfill its oversight responsibilities under the Audit
Committee's charter. In this context, the Audit Committee has discussed with the
independent auditors, Arthur Andersen LLP, the results of their examination,
their evaluation of the Company's internal controls, and the overall quality of
the Company's financial reporting.
Specifically, the Audit Committee has reviewed and discussed the
audited financial statements with the Company's management. In addition, the
Audit Committee has discussed with Arthur Andersen LLP the matters required to
be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committee," as amended, and any other matters required to be discussed
under generally accepted auditing standards. These discussions included the
scope of the auditors' responsibilities, significant accounting adjustments, any
disagreement with management and a discussion of the quality (not just the
acceptability) of accounting principles, reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
Arthur Andersen LLP has provided the Audit Committee with the written
disclosures and the letter required by Independence Standards Board No. 1,
"Independence Discussions with Audit Committees," and the Audit Committee
discussed with the independent auditors that firm's independence from the
Company and its management. During fiscal year 2000, the Company retained its
principal independent auditors, Arthur Andersen LLP, for the audit of the fiscal
year 2000 and the reviews of the Company's 2000 quarterly reports on Forms 10-Q.
Arthur Andersen LLP did not render any services related to financial information
systems design and implementation for the fiscal year ended December 31, 2000.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 for filing with the SEC.
Submitted by the Audit Committee of the Board of Directors.
Stephen C. Richards, Chairman
Brian D. Smith
Lothar Mayer
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EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of the Company has established a Compensation
Committee consisting solely of Independent Directors. See "DIRECTORS AND
EXECUTIVE OFFICERS - Board Meetings and Committees of the Board" for a
discussion of the Compensation Committee and its responsibilities.
GENERAL COMPENSATION PHILOSOPHY
The Compensation Committee's strategy is to develop and implement an
executive compensation program that allows the Company to attract and retain
highly-qualified persons to manage the Company in order to enhance shareholders'
value. The objectives of this strategy are to provide a compensation policy that
permits the recognition of individual contributions and achievements as well as
the Company's operating results. Within this strategy, the Compensation
Committee considers it essential to the vitality of the Company to maintain
levels of compensation opportunity that are competitive with companies in the
Company's industry.
EXECUTIVE COMPENSATION
Executive compensation is comprised of base salary, potential annual
bonus compensation and long-term incentive compensation in the form of stock
options.
BASE SALARIES
Base salary levels for executive officers are designed to be consistent
with competitive practice and level of responsibility, although the Co-Chief
Executive Officers' base salary level in 2000 was below market levels. The
Compensation Committee's strategy in general is to provide a competitive salary
for each executive officer with such salary increasing based on individual
performance, the Company's operating results and changes in responsibility and
competitive markets.
ANNUAL BONUS COMPENSATION
During fiscal year 2000, none of the executive officers received an
annual bonus from the Company (although two executive officers of the Company
who were executive officers of onlinetradinginc.com corp. prior to the December
29, 2000 merger did receive annual performance bonuses from onlinetradinginc.com
corp. based upon its pre-merger operating results). The Compensation Committee's
strategy is to provide an annual bonus for executive officers that is strongly
linked to the Company's operating performance. The Compensation Committee
believes that this strategy is consistent with the approach typically taken by
companies in high-tech industries. See "Other Compensation Arrangements -
Executive Officer Bonus Plan" for a discussion of the Company's bonus plan for
executive officers for fiscal year 2001.
LONG-TERM INCENTIVE COMPENSATION
The Compensation Committee believes that the use of equity-based
long-term compensation plans directly links executive officers' interests to
enhancing shareholders' value. Stock options are an integral part of the
Company's executive compensation program in order to align the interests of the
executive officers with the interests of the Company's shareholders. Stock
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option compensation bears a direct relationship to corporate performance in
that, over the long term, share price appreciation depends upon corporate
performance, and without share price appreciation the stock options are of no
value. Stock option grants are generally provided to executive officers as a
part of their initial compensation package upon becoming an employee of the
Company, and/or upon being promoted, at levels commensurate with their
experience and responsibility. In addition, stock options are considered at
least annually by the Compensation Committee for all executive officers. In that
regard, the Company awarded stock options pursuant to its Incentive Stock Plan
to executive officers of the Company (other than the Co-Chief Executive
Officers) during fiscal years 1998, 1999 and 2000 as described in "Executive
Compensation Tables - SUMMARY COMPENSATION TABLE" and "- OPTION GRANTS IN 2000
FISCAL YEAR."
Submitted by the Compensation Committee of the Board of Directors.
Brian D. Smith, Chairman
Stephen C. Richards
EXECUTIVE COMPENSATION TABLES
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to all
compensation paid or earned for services rendered to the Company in the three
years ended December 31, 2000 by the Co-Chief Executive Officers and the four
other most highly compensated executive officers whose aggregate annual
compensation for 2000 exceeded $100,000, as well as one additional individual
who would have been included in the four other most highly compensated executive
officers but for his not having served as an executive officer as of December
31, 2000 (together, the "Named Executive Officers"). The Company did not have a
pension plan or a long-term incentive plan, had not issued any restricted stock
awards and had not granted any stock appreciation rights as of December 31,
2000. The value of all perquisites and other personal benefits received by each
Named Executive Officer did not exceed 10% of the Named Executive Officer's
total annual compensation.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- -------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (1) (#) SATION ($)
- --------------------------- ------- ---------------- ---------- --------------- ----------------
William R. Cruz......................... 2000 $ 150,000 -- -- --
Co-Chief Executive Officer 1999 150,000 -- -- $ 5,400 (2)
1998 150,000 -- -- --
Ralph L. Cruz........................... 2000 150,000 -- -- --
Co-Chief Executive Officer 1999 150,000 -- -- 5,400 (2)
1998 150,000 -- -- --
Salomon Sredni.......................... 2000 237,000 -- 60,000 --
President and Chief Operating 1999 193,636 $ 25,000 100,000 6,000 (2)
Officer 1998 165,000 10,000 150,000 --
Farshid Tafazzoli....................... 2000 204,944 80,200 -- --
Vice President of Brokerage Technology 1999 193,333 -- -- --
1998 72,000 293,100 -- --
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LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- -------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (1) (#) SATION ($)
- --------------------------- ------- ---------------- ---------- --------------- ----------------
Marc J. Stone........................... 2000 197,250 -- 40,000 --
Vice President of Corporate 1999 186,323 -- -- --
Development, General Counsel 1998 165,000 10,000 130,000 --
and Secretary
E. Steven zum Tobel..................... 2000 147,500 80,200 -- --
Vice President of Brokerage Operations 1999 120,000 -- -- --
1998 (3) 60,000 55,000 -- 26,000 (4)
Andrew Allen............................ 2000 205,500 -- -- 200,000 (5)
Former Chief Executive Officer of 1999 200,000 -- -- --
TradeStation Securities 1998 74,000 525,000 -- --
- --------------------
(1) Represents shares of common stock issuable upon the exercise of options
granted under the Incentive Stock Plan.
(2) Represents 401(k) Plan Company contributions on behalf of the Named
Executive Officer during the indicated year, but paid out during the
subsequent year.
(3) Mr. zum Tobel began his employment with TradeStation Securities in March
1998.
(4) Represents the value of shares issued in conjunction with Mr. zum Tobel's
employment.
(5) Represents severance paid to Mr. Allen upon termination of his employment
in conjunction with the December 29, 2000 merger. Mr. Allen is to receive
two additional $200,000 severance payment installments, one December 29,
2001 and one December 29, 2002.
OPTION GRANTS IN 2000 FISCAL YEAR
The following table summarizes the options that were granted during the
fiscal year ended December 31, 2000 to the Named Executive Officers.
INDIVIDUAL GRANTS
--------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER TOTAL ANNUAL RATE OF
OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO MARKET VALUE AT APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE PRICE GRANT-DATE OPTION TERM(1)
OPTIONS IN FISCAL OR BASE ON GRANT EXPIRATION MARKET -------------------
NAME GRANTED (#)(2) YEAR (%) PRICE ($/SH) DATE ($/SH) DATE PRICE 0% (3)($) 5% 10%
- ---- -------------- ------------- --------------- ----------- ---------- --------------- -------- ---------
William R. Cruz.... -- -- -- -- -- -- -- --
Ralph L. Cruz...... -- -- -- -- -- -- -- --
Salomon Sredni..... 60,000 (4) 5% $ 6.63 $ 6.625 1/15/10 -- $ 249,686 $ 633,213
Farshid Tafazzoli.. -- -- -- -- -- -- -- --
Marc J. Stone...... 40,000 (4) 4% 6.63 6.625 1/15/10 -- 166,457 422,142
E. Steven zum Tobel -- -- -- -- -- --
Andrew Allen....... -- -- -- -- -- -- -- --
- --------------------
(1) Potential realizable value is based on the assumption that the Common
Stock price appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. The amounts have
been calculated based on the requirements promulgated by the SEC. The
actual value, if any, a Named Executive Officer may realize will depend
on the excess of the stock price over the exercise price on the date the
option is exercised (if the executive officer were to sell the shares on
the date of exercise), so there is no assurance that the value realized
will be at or near the potential realizable value as calculated in this
table.
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(2) These options vest over five years and have a term of ten years from the
date of grant, subject to acceleration under certain circumstances.
(3) For purposes of and as provided under the Incentive Stock Plan, "fair
market value" on the date of grant of any option is the average of the
high and low sales prices of a share of Common Stock on The Nasdaq
National Market on the trading day immediately preceding the date of
grant. The Compensation Committee believes this calculation more
accurately reflects "fair market value" of the Common Stock on any given
day as compared to simply using the closing market price on the date of
grant. As a result, the closing market price on the date of grant at
times may be different than the exercise price per share.
(4) Options become exercisable in one-fifth increments on January 16, 2001,
2002, 2003, 2004, and 2005.
AGGREGATED OPTION EXERCISES IN 2000 FISCAL YEAR
AND 2000 FISCAL YEAR-END OPTION VALUES
The following table provides information regarding the value of all
options exercised during 2000 by the Named Executive Officers, and of all
unexercised options held at December 31, 2000 by the Named Executive Officers
measured in terms of the closing market price of the Common Stock on December
31, 2000.
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2000 (#) DECEMBER 31, 2000 ($)(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXCERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- --------------- ------------ -------------- ------------ --------------
William R. Cruz....... -- -- -- -- -- --
Ralph L. Cruz......... -- -- -- -- -- --
Salomon Sredni........ -- -- 172,000 258,000 $ 71,020 $ 30,905
Farshid Tafazzoli..... -- -- -- -- -- --
Marc J. Stone......... -- -- 94,000 146,000 $ 7,770 $ 11,655
E. Steven zum Tobel... -- -- -- -- -- --
Andrew Allen.......... -- -- -- -- -- --
- --------------------
(1) Based on a per share price of $1.9375 on December 31, 2000, which was the
closing market price of the Common Stock on the last day of the 2000
fiscal year.
OTHER COMPENSATION ARRANGEMENTS
EXECUTIVE OFFICER BONUS PLAN
The Compensation Committee has authorized an incentive bonus
compensation program for certain executive officers of the Company. Under the
program, an executive officer will be eligible to earn an annual bonus for 2001
of up to 20% of his or her base salary. To be eligible for any bonus, the
Company's total revenues for 2001 must be at least 90% of the amount projected
in the Company's internal incentive budget. If that occurs, the Company's 2001
net loss or net income, if it achieves certain levels, will determine if the
executives are eligible for bonuses of an amount between 5% to 20% of their
respective 2001 base salaries. The actual bonuses will then equal 25%, 50% or
100% of the eligible amount, based upon certain other criteria evaluated by the
President of the Company.
INCENTIVE STOCK PLAN
The Company's Incentive Stock Plan, pursuant to which officers,
employees and nonemployee consultants may be granted stock options, stock
appreciation rights, stock awards, performance shares and performance units,
became operative December 29, 2000 upon closing of the merger and the Company's
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assumption of TradeStation Technologies' Amended and Restated 1996 Incentive
Stock Plan, as amended. Each option issued under TradeStation Technologies' plan
was assumed and converted to one option to purchase the Company's Common Stock
at the original exercise price. The authorized number of shares of Common Stock
for issuance under the Incentive Stock Plan is 7,500,000 (which includes 245,839
shares already issued under the predecessor company's plan), subject to future
antidilution adjustments. As of December 31, 2000, options to purchase 3,981,044
shares were outstanding and 3,273,117 shares were available for issuance under
the Company's Incentive Stock Plan.
The Incentive Stock Plan is administered by the Compensation Committee
of the Board of Directors, whose members must qualify as "nonemployee directors"
(as such term is defined in Rule 16b-3 under the Exchange Act). The Compensation
Committee is authorized to determine, among other things, the employees to whom,
and the times at which, options and other benefits are to be granted, the number
of shares subject to each option, the applicable vesting schedule and the
exercise price (provided that, for incentive stock options, the exercise price
shall not be less than 100% of the fair market value of the Common Stock on the
date of grant). The Compensation Committee also determines the treatment to be
afforded to a participant in the Incentive Stock Plan in the event of
termination of employment for any reason, including death, disability or
retirement, or change in control. Under the Incentive Stock Plan, the maximum
term of an incentive stock option is ten years and the maximum term of a
nonqualified stock option is fifteen years.
The Compensation Committee may delegate to the Company's Co-Chief
Executive Officers the authority to grant options under the Incentive Stock Plan
to employees (other than officers) of the Company identified by the Co-Chief
Executive Officers. The Compensation Committee has historically delegated to the
Co-Chief Executive Officers the authority to grant options covering up to
250,000 shares of common stock per annum, and retains the ability to revoke the
delegation at any time. No such authority is currently delegated to the Co-Chief
Executive Officers.
The Board of Directors has the power to amend the Incentive Stock Plan
from time to time. Shareholder approval of an amendment is only required to the
extent that it is necessary to maintain the Incentive Stock Plan's status as a
protected plan under applicable securities laws or as a qualified plan under
applicable tax laws.
TRADESTATION SECURITIES ASSUMED OPTIONS
In connection with the merger, the Company assumed the outstanding
options under TradeStation Securities' 1999 incentive stock plan. Each option
issued under TradeStation Securities' plan was assumed and converted to 1.7172
options to purchase the Company's Common Stock at the original exercise price
divided by 1.7172. As of December 31, 2000, options to purchase 792,895 shares
were outstanding.
WINDOW ON WALLSTREET ASSUMED OPTIONS
In October 1999, TradeStation Technologies assumed all outstanding
stock options to purchase Window On WallStreet common stock ("WOW Options"),
which, based on an exchange ratio of .210974 shares of TradeStation
Technologies' common stock for each share of Window On WallStreet common stock,
were exercisable at the time of assumption for an aggregate of 182,529 shares of
common stock (82,783 shares of common stock at an exercise price of $.48 per
share, and 99,746 shares of common stock at an exercise price of $8.06 per
share). The WOW Options generally vest ratably over a four-year period and their
terms are ten years. After giving effect to the company's assumption of the WOW
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Options pursuant to the December 29, 2000 merger, as of December 31, 2000 there
were 163,449 WOW Options outstanding.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
The Nonemployee Director Stock Plan, pursuant to which initial and
annual grants of nonqualified stock options are made to each Independent
Director, became operative December 29, 2000 upon the closing of the merger by,
on that date, assumption of the TradeStation Technologies' Nonemployee Director
Stock Option Plan and all options and option agreements issued thereunder. Upon
initial election to the Board of Directors, each Independent Director may be
granted an option to purchase up to 75,000 shares of Common Stock as determined
by the Board of Directors at such time. Upon each reelection to the Board of
Directors at the annual meeting of shareholders, each Independent Director will,
subject to the proposed amendment, be automatically granted an additional option
to purchase 3,000 shares of Common Stock. Each option will be granted at an
exercise price equal to the fair market value of the common stock on the date of
grant. The Company has, subject to the proposed amendment, reserved 175,000
shares of common stock for issuance under the Nonemployee Director Stock Plan,
subject to antidilution adjustments. Options granted to date have a term of five
years and vest in equal installments over three years. As of December 31, 2000,
options to purchase 53,000 shares were outstanding and 47,000 shares were
available for issuance under the Nonemployee Director Stock Plan.
For a summary of all of the material terms of the Nonemployee Director
Stock Plan and a discussion of the proposed amendment to such plan increasing to
350,000 the number of shares reserved for issuance and increasing to 7,000 the
number of shares included in the options automatically granted to an Independent
Director upon each annual reelection, which is to be voted upon at the Annual
Meeting, see "Proposal 2 - APPROVAL OF AMENDMENT TO THE TRADESTATION GROUP, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN."
OUTSTANDING OPTIONS
As of December 31, 2000, options to purchase a total of 4,990,388
shares were outstanding under all stock option plans (inclusive of all options
assumed under the plans discussed above), of which options to purchase 1,121,639
shares had been granted to executive officers (including one former executive
officer). During 2000, options granted to executive officers totaled options to
purchase 236,516 shares of Common Stock, which were granted at exercise prices
ranging from $2.66 to $6.63 per share. In general, options granted under the
Incentive Stock Plan and the other incentive stock plans described above vest at
the rate of 20% per year and have a total term of ten years (except for the WOW
Options, which vest ratably over four years). Options which have been granted
under the Incentive Stock Plan to certain executive officers immediately vest
and become exercisable upon termination of employment due to death or permanent
disability, or, under certain circumstances, upon a sale or a change in control
of the Company. The options to purchase the shares granted and assumed under the
plans discussed above that were outstanding as of December 31, 2000 have a
weighted average exercise price of $3.90 per share.
EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan became operative December 29, 2000
upon the closing of the merger and the assumption of TradeStation Technologies'
Employee Stock Purchase Plan. The Employee Stock Purchase Plan provides for the
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issuance of a maximum of 500,000 shares of Common Stock pursuant to the exercise
of nontransferable options granted to participating employees.
The Employee Stock Purchase Plan is administered by the Compensation
Committee of the Board of Directors. All employees whose customary employment is
more than 20 hours per week and more than five months in any calendar year and
who have completed at least three months of employment are eligible to
participate in the Employee Stock Purchase Plan. Employees who would immediately
after the grant own 5% or more of the total combined voting power or value of
the Company's stock, and the Independent Directors, may not participate in the
Employee Stock Purchase Plan. To participate in the Employee Stock Purchase
Plan, an employee must authorize the Company to deduct an amount (not less than
one percent nor more than ten percent of a participant's total cash
compensation) from his or her pay during six-month periods (each a "Plan
Period"). The maximum number of shares of Common Stock an employee may purchase
in any Plan Period is 500 shares. The exercise price for the option for each
Plan Period is 85% of the lower of the market price of the Common Stock on the
first and last business day of the Plan Period. If an employee is not a
participant on the last day of the Plan Period, such employee is not entitled to
exercise his or her option, and the amount of his or her accumulated payroll
deductions will be refunded. An employee's rights under the Employee Stock
Purchase Plan terminate upon his or her voluntary withdrawal from the Employee
Stock Purchase Plan or upon termination of employment. The first Plan Period
(giving effect to the assumption of the predecessor company's plan) began
January 1, 1998. During the years ended December 31, 2000, 1999 and 1998,
30,210, 23,585 and 12,506 shares, respectively, of Common Stock were issued
under the plan at average prices of $2.07, $3.27 and $3.06, respectively. As of
December 31, 2000, there were 433,699 shares available for issuance under the
Employee Stock Purchase Plan.
The Board of Directors has the power to amend or terminate the Employee
Stock Purchase Plan. Shareholder approval of an amendment is only required to
the extent that it is necessary to maintain the Employee Stock Purchase Plan's
status as a protected plan under applicable securities laws or as a qualified
plan under applicable tax laws.
401(k) PLAN
The Company has a defined contribution retirement plan which complies
with Section 401(k) of the Internal Revenue Code. All employees with at least
three months of continuous service are eligible to participate and may
contribute up to 15% of their compensation. Company contributions are vested 20%
for each year of service. Matching contributions accrued under the 401(k) Plan
amounted to approximately $242,000 in 1999. There were no matching contributions
accrued in 2000 or 1998.
EMPLOYMENT AGREEMENTS
Historically, the Company has entered into employment agreements with
officers solely in connection with mergers and acquisitions pursuant to which an
officer of the acquired company is already a party to an existing employment
agreement with the acquired company and then continues as one of the Company's
officers. These employment agreements with those who are currently executive
officers of the Company consist of the following:
In connection with the December 29, 2000 merger with TradeStation
Securities, Farshid Tafazzoli, Vice President of Brokerage Technology, E. Steven
zum Tobel, Vice President of Brokerage Operations, and Roger L. Shaffer, Vice
President of Brokerage Compliance, each received a two-year employment agreement
with base salaries of $200,000, $150,000 and $125,000 per annum, respectively,
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and the right to participate in the incentive bonus compensation plans that are
made available to certain other executive officers of the Company. In connection
with the October 1999 acquisition of Window On WallStreet, Sean M. Davis, Vice
President of Investor and Media Relations, received a two-year employment
agreement under which his base salary (originally $100,000 per annum) is
currently $125,000 per annum.
All of these agreements contain confidentiality, non-solicitation and
two-year non-compete covenants each in form and substance substantially similar
to the non-competition agreements described below. Mr. Tafazzoli and Mr. zum
Tobel, in their capacities as selling shareholders of TradeStation Securities,
have each signed separate non-compete agreements for four- and two-year periods,
respectively.
SEVERANCE AGREEMENT
Andrew A. Allen, the former Chairman of the Board and Chief Executive
Officer of TradeStation Securities, is entitled under an employment agreement
with TradeStation Securities to a severance payment of $600,000 because he
elected to terminate his employment following the change in control of
TradeStation Securities produced by the merger. Mr. Allen has already been paid
$200,000 and will be paid an additional $200,000 on each of December 29, 2001
and December 29, 2002.
NON-COMPETITION AGREEMENTS
Virtually all employees, including the Named Executive Officers, have
entered into agreements with the Company which generally contain certain
non-competition, non-disclosure and non-solicitation restrictions and covenants,
including a provision prohibiting such employees from competing with the Company
during their employment and for a period of at least two years thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was formed in
December 2000, at which time two of the Independent Directors were appointed as
members. These same two independent directors had also served on the predecessor
company's Compensation Committee during 2000. The compensation (including
salaries, bonuses and stock options) of the Company's executive officers for
2000 was determined by the predecessor company's Compensation Committee. In
2000, neither member of the Compensation Committee of the Board of Directors of
the Company (or the predecessor company) had any relationship with the Company
(or the predecessor company) requiring disclosure under Item 404 of Regulation
S-K.
PERFORMANCE GRAPH
The following graph shows a monthly comparison for the period covering
October 1, 1997 through December 31, 2000 of cumulative total returns to
shareholders of Omega Research, Inc. (TradeStation Group's predecessor, which
was publicly-traded from October 1, 1997 until trading commenced January 2, 2001
for TradeStation Group), Center for Research in Security Prices ("CRSP") Index
for NASDAQ Stock Market (U.S. Companies) and CRSP Index for NASDAQ Stocks (SIC
6210-6219 U.S. Companies) of U.S. security brokers, dealers, and flotation
companies.
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[PERFORMANCE GRAPH]
The following table presents in tabular form the data set forth in the
performance graph to be included in this Proxy Statement:
CRSP TOTAL RETURNS INDEX FOR:
NASDAQ STOCKS (SIC
6210-6219 U.S. COMPANIES)
IN U.S. SECURITY BROKERS,
NASDAQ STOCK MARKET DEALERS, AND FLOTATION
DATE COMPANY (US COMPANIES) COMPANIES
----------- ------------ --------------------- -------------------------
10/01/1997 $100.0 $100.0 $100.0
10/31/1997 70.2 94.5 91.4
11/28/1997 43.6 95.0 89.3
12/31/1997 45.7 93.3 84.6
01/30/1998 26.1 96.3 84.5
02/27/1998 29.8 105.4 90.9
03/31/1998 31.9 109.3 94.7
04/30/1998 47.3 111.1 100.7
05/29/1998 41.5 104.9 93.3
06/30/1998 35.6 112.3 96.5
07/31/1998 29.3 110.9 98.7
08/31/1998 19.1 88.9 73.1
09/30/1998 18.1 101.3 75.3
10/30/1998 13.3 105.7 81.4
11/30/1998 18.1 116.5 96.5
12/31/1998 25.5 131.6 115.5
01/29/1999 37.2 150.7 189.0
02/26/1999 101.1 137.2 173.5
03/31/1999 91.0 147.6 219.1
04/30/1999 80.9 152.4 400.7
05/28/1999 80.9 148.1 313.7
06/30/1999 93.6 161.5 331.8
07/30/1999 86.2 158.6 251.9
08/31/1999 52.7 165.3 208.3
09/30/1999 33.0 165.5 191.7
10/29/1999 48.9 178.8 193.1
11/30/1999 49.2 200.5 243.5
12/31/1999 51.1 244.6 234.7
01/31/2000 54.3 235.5 192.5
02/29/2000 46.8 280.3 221.5
03/31/2000 39.4 274.5 254.7
04/28/2000 27.1 230.9 197.3
05/31/2000 27.7 203.1 157.8
06/30/2000 25.5 238.7 169.9
07/31/2000 24.9 225.8 159.5
08/31/2000 25.5 252.5 188.6
09/29/2000 22.3 219.7 189.7
10/31/2000 19.7 201.6 175.4
11/30/2000 14.9 155.3 120.0
12/29/2000 16.5 147.0 121.8
NOTES:
A. The lines represent monthly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are reweighted daily, using the market
capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 10/01/1997.
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CERTAIN TRANSACTIONS
Marc J. Stone, the Vice President of Corporate Development, General
Counsel and Secretary, was a partner in a predecessor law firm to Bilzin Sumberg
Dunn Baena Price & Axelrod LLP until immediately prior to joining the Company in
May 1997. Thereafter, Mr. Stone was of counsel to the predecessor firm and is
currently of counsel to Bilzin Sumberg. Bilzin Sumberg and its predecessor firms
have acted as the Company's regular outside legal counsel since 1994. The total
fees and costs paid by the Company to Bilzin Sumberg in 2000 were approximately
$263,000. The Company believes that the fees paid are no less favorable than
could be obtained from comparable law firms in the Miami area.
PROPOSAL 1
ELECTION OF DIRECTORS
Eight directors are to be elected at the Annual Meeting to hold office
until the annual meeting of shareholders next succeeding their election and
until their respective successors are elected and qualified or as otherwise
provided in the Bylaws of the Company. The nominees for directors who receive a
plurality of the votes cast by the holders of outstanding shares of Common Stock
entitled to vote at the Annual Meeting will be elected. Abstentions (withheld
authority) and broker non-votes are not counted in determining the number of
shares voted for or against any nominee for director. It is expected that the
Cruz Group and Online Group will cause all of their shares of Common Stock
subject to the voting trust agreement among them, which represents approximately
74.8% of the outstanding shares of the Company as of the Record Date, to be
voted for all of the nominees for directors. Accordingly, their election is
assured. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -
Voting Trust."
The Board of Directors has designated the persons listed to be nominees
for election as directors. Each of the nominees (other than Charles F. Wright)
is currently serving as a director of the Company and each has consented to
being named in the Proxy Statement and to serve if elected. Mr. Wright, who is
not currently serving as a director, has been nominated to replace Brian D.
Smith, who is retiring. The Company has no reason to believe that any of the
nominees will be unavailable for election; however, should any nominee become
unavailable for any reason, the Board of Directors may designate a substitute
nominee or the number of authorized directors may be reduced. Each proxy will be
voted for the election to the Board of Directors of all of the Board of
Directors' nominees unless authority is withheld to vote for all or any of those
nominees.
NAME DIRECTOR SINCE
---- --------------
Ralph L. Cruz 1982
William R. Cruz 1982
Lothar Mayer 2000
Stephen C. Richards 1999
Salomon Sredni 1997
Farshid Tafazzoli 2000
E. Steven zum Tobel 2000
Charles F. Wright --
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For biographical and other information (including their respective
principal occupations for at least the past five years) regarding all of the
nominees (other than Charles F. Wright), see "DIRECTORS AND EXECUTIVE OFFICERS,"
and regarding Charles F. Wright, see below.
CHARLES F. WRIGHT, age 50, is the Chairman of Fall River Group, Inc.,
which owns and operates a group of foundries in Wisconsin. He has been Chairman
since 1984, and has been associated with Fall River Group since 1973. He is also
the Chairman and a Principal of Fall River Capital, LLC, an investment advisory
firm that specializes in the trading of global financial and natural resource
futures. He has held these positions since 1999. Since 1997, Mr. Wright has also
been Chairman and a co-owner of Quaestus & Co., Inc., a merchant banking firm
located in Milwaukee, Wisconsin. From 1992 until its acquisition by Cumulus
Media, Inc. in 1997, Mr. Wright served as Chairman of Caribbean Communications
Company Ltd., a developer and operator of a radio network throughout the
English-speaking Caribbean Islands. Mr. Wright serves as Chairman of Goodwill
Industries of Southeastern Wisconsin and Metropolitan Chicago, President of
Second Harvest Food Bank Foundation, trustee of University School of Milwaukee,
and a director of the Private Industry Council of Milwaukee County. Mr. Wright
is registered with the CFTC and the NFA as a Commodity Trading Advisor, and
holds a Master's Degree in Business Administration from Harvard University
Graduate School of Business.
In October 1999, Mr. Wright entered into a three-year consulting
agreement to provide certain consulting services to TradeStation Technologies
related to the development of educational software in the area of securities
trading. At the time of entering into such agreement and in full consideration
for all services rendered, Mr. Wright was paid $30,000 and granted options to
purchase 30,000 shares of common stock at a price of $4.22 per share (the fair
market value on the date of grant), which vest in annual one-third increments
and have a term of ten years. It is contemplated that Mr. Wright will serve on
both the Audit Committee and Compensation Committee of the Board of Directors.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES
LISTED ABOVE.
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE
TRADESTATION GROUP, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
SUMMARY OF PLAN
PURPOSE
The Board submits to the shareholders for their approval an amendment
to the Nonemployee Director Stock Plan (i) to increase the number of shares
reserved for issuance under the Nonemployee Director Stock Plan from 175,000
shares of Common Stock to 350,000 shares of Common Stock, subject to future
antidilution adjustments, and (ii) to increase the number of shares of options
automatically granted to an Independent Director upon each annual reelection
from 3,000 shares of Common Stock to 7,000 shares of Common Stock. The material
provisions of the Nonemployee Director Stock Plan are summarized below. The
purpose of the Nonemployee Director Stock Plan is to provide incentives which
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will attract and retain outstanding individuals to serve as Independent
Directors. It is intended to enable Independent Directors to own stock in the
Company, thereby strengthening the mutuality of interest between them and the
Company's shareholders.
NUMBER OF SHARES
The Company originally reserved 175,000 shares of Common Stock for
issuance of nonqualified stock options under the Nonemployee Director Stock
Plan, subject to further antidilution adjustments. Of such 175,000 shares, only
22,000 shares remain available for future option grants as of the Record Date as
a result of prior exercises of options and outstanding option grants. See
"Outstanding Awards" below. The proposed amendment to the Nonemployee Director
Stock Plan would increase the number of shares reserved for issuance under the
Nonemployee Director Stock Plan to 350,000 shares of Common Stock, subject to
further antidilution adjustments.
ADMINISTRATION
The Nonemployee Director Stock Plan is administered by the Board of
Directors. The Board of Directors is authorized to determine, among other
things, the number of shares, up to 75,000 shares, of Common Stock an
Independent Director will be granted the option to purchase upon initial
election to the Board.
ELIGIBILITY
Only Independent Directors are eligible to participate in the
Nonemployee Director Stock Plan.
TYPES OF AWARDS
The Nonemployee Director Stock Plan permits only the grant of
nonqualified stock options ("NSOs") to Independent Directors. NSOs do not
qualify for preferred tax treatment under Section 422 of the Internal Revenue
Code. See "Federal Income Tax Consequences" below. These stock options are
described below.
STOCK OPTIONS
The stock options are granted to Independent Directors in the form of
agreements which enable the optionee to purchase a specific number of shares of
Common Stock at set terms and a fixed purchase price. The grant upon initial
election to the Board of Directors may not exceed 75,000 shares, and is
determined by the Board at such time. Subject to the proposed amendment, upon
each reelection to the Board of Directors an Independent Director is
automatically awarded NSOs to purchase 3,000 shares of Common Stock. The
proposed amendment would increase that number to 7,000 shares. An annual option
upon reelection may not be granted if the date of reelection is not at least 12
months later than the date of the initial grant.
The fixed purchase price is required to be the fair market value of the
Common Stock on the date of the grant, which is defined as the average of the
highest and lowest sale prices of shares of Common Stock as reported on The
Nasdaq National Market on the trading day immediately preceding the date of
grant.
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The vesting schedule of any option grant that is authorized is
one-third, ratably over the first three anniversaries of the date of grant,
provided that an option becomes fully vested and exerciseable upon an
Independent Directors's death or retirement from the Board if such event occurs
on or after the first anniversary of the date the option is granted. The
Nonemployee Director Stock Plan defines "retirement" as an Independent
Director's termination of service as a director after reaching the age of 70 or
any time with the consent of the Board of Directors. The exercise date may not
be later than the tenth anniversary of the date of grant or such shorter period
as determined by the Board of Directors upon grant, provided that upon ceasing
to serve as an Independent Director the Independent Director (or his estate)
only has up to 90 days (up to 180 days if a retirement and up to one year if
death) to exercise the options that are vested and exerciseable at the time of
the Independent Director's termination of service.
Options are deemed exercised on the date written notice of exercise is
received by the Secretary of the Company accompanied by (i) a check for the
purchase price of the shares to be purchased; (ii) delivery of shares of Common
Stock that have been owned by the Independent Director for at least six months
having a fair market value on the date of exercise equal to the purchase price
of the shares to be purchased; or (iii) a combination of items (i) and (ii).
OTHER TERMS
Awards granted under the Nonemployee Director Stock Plan are
non-transferable by the participant, other than as required by law (including a
qualified domestic relations order as defined by the Internal Revenue Code or
Title I of the Employment Retirement Income Security Act, or the rules
thereunder), by will or the laws of descent and distribution or to the
participant's immediate family (which is limited to the participant's spouse,
children, grandchildren or other lineal descendents), or to one or more trusts
or family partnerships for the benefit of such immediate family members. Except
with respect to a qualified domestic relations order, stock options may be
exercised during the lifetime of the participant only by the participant or the
participant's guardian or legal representative.
If the Company at any time changes the number of issued Common Stock
without new consideration to the Company (such as by stock dividend or stock
split), the total number of shares available for stock options under the
Nonemployee Director Stock Plan shall be appropriately adjusted and the number
of shares covered by each outstanding stock option grant and the exercise price
for each outstanding stock option grant shall be adjusted so that the aggregate
consideration payable to the Company and the value of each option shall not be
changed.
In the event any sale of assets, merger, consolidation, reorganization
or other similar transaction which results in the outstanding Common Stock being
converted into or exchanged for different securities, cash or other property,
the Board of Directors shall cause adequate provision to be made whereby the
optionee will be entitled to receive, upon exercise of the stock option grant,
an equivalent amount of securities, cash or other property received with respect
to the Common Stock in such transaction as would have been received upon
exercise of the stock option grant immediately prior to such transaction.
The Nonemployee Director Stock Plan and actions taken in connection
therewith are governed by and construed in accordance with the laws of the State
of Florida (regardless of the law that might otherwise govern under applicable
Florida principles of conflicts of laws).
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The Board may amend, suspend or discontinue the Nonemployee Director
Stock Plan at any time, but such amendment, suspension or discontinuation may
not adversely affect any outstanding stock option without the consent of the
holder.
Stock option grants and the exercise thereof are subject to any
additional applicable restrictions under Rule 16b-3.
REGISTRATION OF UNDERLYING COMMON STOCK
The Company has filed a Registration Statement on Form S-8 with the SEC
in order to register the number of shares of Common Stock reserved for issuance
under the Nonemployee Director Stock Plan which were available for issuance as
of the effective date of the merger. To the extent that such Registration
Statement is effective under the Securities Act of 1933, as amended (the
"Securities Act"), shares of Common Stock issued upon the exercise of
outstanding stock options granted under the Nonemployee Director Stock Plan will
be immediately and freely tradable without restriction under the Securities Act,
subject to applicable volume limitations, if any, under Rule 144 promulgated
under the Securities Act and Section 16 of the Exchange Act. Subject to the
approval of the Company's shareholders of this Proposal 2, it is currently
contemplated that at the appropriate time the Company will file an additional
Registration Statement on Form S-8 in order to register the additional 175,000
shares of Common Stock reserved for issuance under the Nonemployee Director
Stock Plan.
OUTSTANDING AWARDS
As of the Record Date, options to purchase 78,000 shares were
outstanding under the Nonemployee Director Stock Plan. An additional 75,000
options have been exercised which, without giving effect to the proposed
amendment, leaves 22,000 shares reserved for issuance. In general, the options
that have been granted under the Nonemployee Director Stock Plan vest at the
rate of 33 1/3% per year and have a total term of five years. The options which
have been granted under the Nonemployee Director Stock Plan immediately vest and
become exercisable upon termination of the directorship due to death or
retirement.
The options to purchase shares granted under the Nonemployee Director
Stock Plan that were outstanding as of the Record Date have a weighted average
exercise price of approximately $3.17 per share.
RECENT PRICE OF COMMON STOCK
On May 15, 2001, the closing sale price of the Common Stock on The
Nasdaq National Market was $4.30 per share.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the applicable federal income tax
consequences of options granted under the Nonemployee Director Stock Plan based
on U.S. federal income tax laws in effect on the date of this Proxy Statement.
THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF ANY INCOME TAX LAWS
OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH A GRANTEE MAY RESIDE.
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With respect to the options (all of which are NSOs): (i) generally, no
income is recognized by the optionee at the time the option is granted; (ii)
generally, at exercise, ordinary income is recognized by the optionee in an
amount equal to the difference between the option exercise price paid for the
shares and the fair market value of the shares on the date of exercise, and the
Company is entitled to a tax deduction in the same amount; and (iii) upon
disposition of the shares, any gain or loss recognized (after increasing the
basis of such shares by the amount of any ordinary income previously recognized)
is treated as short-term or long-term capital gain or loss (as the case may be)
depending on how long such shares are held. To qualify for long-term capital
gain treatment, such shares will have to be held for more than one year and, if
not, any short-term capital gain shall be taxable at ordinary income tax rates.
AMENDMENT TO THE NONEMPLOYEE DIRECTOR STOCK PLAN
PROPOSAL
Because the Board considers the Nonemployee Director Stock Plan a very
effective means to attract and retain outstanding individuals to serve as
Independent Directors, which the Board believes is important for the success and
future growth and development of the Company, the Board, on May 17, 2001,
approved an amendment to the Nonemployee Director Stock Plan, subject to the
approval of the Company's shareholders. The Board seeks the approval of the
Company's shareholders to increase the number of shares of Common Stock issuable
pursuant to the Nonemployee Director Stock Plan from 175,000 shares to 350,000
shares and to increase the number of shares of options automatically granted to
an Independent Director upon each annual reelection from 3,000 to 7,000.
PURPOSE OF THE AMENDMENT
The purpose for increasing the number of shares available for issuance
and the annual reelection grants under the Nonemployee Director Stock Plan is to
ensure that the Company will continue to be able to grant stock options as
incentives to attract and retain outstanding individuals as Independent
Directors.
REQUIRED VOTE
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting which cast a vote on
Proposal 2 is necessary for the adoption and approval of the proposed amendment
to the Nonemployee Director Stock Plan.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
NONEMPLOYEE DIRECTOR STOCK PLAN.
PROPOSAL 3
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP acted as the Company's
independent public accountants for the Company's fiscal year ended December 31,
2000. The Audit Committee of the Board of Directors of the Company recommended
and the Board resolved that Arthur Andersen LLP serve as the Company's
independent public accountants for the fiscal year ending December 31, 2001,
subject to finalizing the terms of engagement of Arthur Andersen LLP for fiscal
year 2001. Such independent accountants will continue to serve at the pleasure
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of the Board. A representative of Arthur Andersen LLP is expected to be present
at the Annual Meeting in order to have the opportunity to make a statement, if
such representative desires to do so, and to be available to respond to
appropriate questions relating to the examination by Arthur Andersen LLP of the
Company's 2000 financial statements.
Shareholder approval of the Company's auditors is not required under
Florida law. The Board is submitting its selection of Arthur Andersen LLP to the
Company's shareholders for ratification in order to determine whether the
shareholders generally approve of the Company's auditors. If selection of Arthur
Andersen LLP is not approved by the shareholders, the Board will reconsider its
selection.
Arthur Andersen LLP has acted as independent accountants of the Company
and its consolidated subsidiaries (as and when acquired) since 1997. In
addition, during the Company's 2000 fiscal year, Arthur Andersen LLP consulted
with the Company on various matters and performed services for the Company for
fees and expenses as follows:
1. Audit Fees (including Review Fees) $ 145,000
2. Financial Information Systems
Design and Implementation $ 0
3. All Other Fees $ 295,000
The Audit Committee has considered whether the provision of the
services provided by Arthur Andersen LLP covered by All Other Fees above is
compatible with maintaining the firm's independence.
REQUIRED VOTE
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting which cast a vote on
Proposal 3 is necessary for the ratification of the selection of the independent
public accountants.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF ARTHUR
ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2002 annual
meeting of shareholders must be submitted to the Secretary of the Company, at
the principal executive offices of the Company, 8700 West Flagler Street, Miami,
Florida 33174, no later than January 18, 2002, in order to receive consideration
for inclusion in the Company's 2002 proxy materials. Any such shareholder
proposal must comply with the requirements of Rule 14a-8 promulgated under the
Securities Exchange Act.
The persons named as proxies for the 2002 annual meeting of
shareholders will generally have discretionary authority to vote on any matter
presented by a shareholder for action at that meeting. Generally, in the event
that the Company receives notice of any shareholder proposal no later than the
close of business on the sixtieth (60th) day, nor earlier than the close of
business on the ninetieth (90th) day, prior to the first anniversary of the date
of the Annual Meeting, then, so long as the Company includes in its proxy
statement for the 2002 annual meeting of shareholders advice on the nature of
the matter and how the named proxies intend to vote the shares for which they
have received discretionary authority, such proxies may exercise discretionary
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29
authority with respect to such matter, subject to, and except to the extent
limited by, the rules of the SEC governing shareholder proposals.
OTHER MATTERS
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN, WITHOUT CHARGE, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITH EXHIBITS), AS AMENDED, FOR THE
COMPANY'S FISCAL YEAR ENDED DECEMBER 31, 2000, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, BY SENDING A WRITTEN REQUEST TO MARC J. STONE, VICE
PRESIDENT OF CORPORATE DEVELOPMENT, GENERAL COUNSEL AND SECRETARY OF THE
COMPANY, AT THE COMPANY'S EXECUTIVE OFFICES LOCATED AT 8700 WEST FLAGLER STREET,
MIAMI, FLORIDA 33174.
By Order of the Board of Directors
/s/ Marc J. Stone
------------------------------------
Marc J. Stone
Secretary
May 18, 2001
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"APPENDIX A"
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
-----------------------------------------------------
I. PURPOSE
The primary function of the Audit Committee (the "Committee") is to
assist the Board of Directors (the "Board") in fulfilling its
responsibilities relating to the company's accounting and financial
reporting practices by providing a channel of communication between the
Board and the company's independent accountants and internal auditors
(if any) and by reviewing the company's financial reports and its
auditing, accounting and financial reporting processes generally.
Consistent with this function, the Committee should encourage
continuous improvement of, and should foster adherence to, the
company's policies, procedures and practices at all levels. The
Committee's primary duties and responsibilities are to:
o Serve as an independent and objective party to monitor the
company's financial reporting process and internal control
system.
o Review and appraise the audit efforts of the company's
independent accountants and internal auditing department (if
any).
o Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal
auditing department (if any), and the Board of Directors.
The Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors,
and free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment as a
member of the Committee; provided, however, that prior to June 14, 2001
only two of the three directors are required to be independent
directors.
An independent director will not include a director who:
(i) is an officer or employee of the company or its
subsidiaries;
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(ii) has been employed by the corporation or any of its
affiliates in the current year or any of the past
three years;
(iii) accepted compensation from the company or any of its
affiliates in excess of $60,000 during the previous
fiscal year, other than compensation for board
service, benefits under a tax-qualified retirement
plan, or non-discretionary compensation;
(iv) is a member of the immediate family of an individual
who is, or has been in any of the past three years,
employed by the company or any of its affiliates as
an executive officer;
(v) is a partner, controlling shareholder, or executive
officer of any for-profit business organization to
which the company made or from which the company
received payments that exceed five percent of such
business organization's consolidated gross revenues
for that year or $200,000, whichever is more, in any
of the past three years; or
(vi) is employed as an executive of another entity where
any of the company's executives are on that entity's
compensation committee.
All members of the Committee shall have a working familiarity with
basic finance and accounting practices, including the ability to read
and understand the company's fundamental financial statements, and at
least one member of the Committee shall have accounting or related
financial management expertise.
Committee members shall be selected by majority vote of the Board. The
Committee shall elect by majority vote a Chairperson from its members.
III. MEETINGS
The Committee shall meet annually, or more frequently as circumstances
dictate. As part of its job to foster open communication, the Committee
may meet with management, the director of the internal auditing
department (if any) and the independent accountants in separate
executive sessions to discuss any matters that the Committee or each of
these groups believe should be discussed privately. In addition, the
Committee or at least its Chairperson should meet with the independent
accountants and management quarterly to review the company's financial
statements consistent with Section IV below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review, and if necessary update, this Charter at
least annually.
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2. Review the company's quarterly and annual financial
statements.
3. Review the regular internal reports to management
prepared by the internal auditing department (if any)
and management's response.
4. Review with financial management and the independent
accountants any Form 10-Q or 10-K prior to its filing
or prior to the release of earnings. The Chair of the
Committee may represent the entire Committee for
purposes of this review.
5. Inform the Board of its determination whether or not
to recommend that the audited financial statements be
included in the company's Annual Report on Form 10-K.
6. Prepare a report for inclusion in the company's
annual proxy statement stating that the Committee
has:
(i) reviewed and discussed the audited
financial statements with management;
(ii) discussed with the independent
accountants the matters relating to the conduct of
the audit;
(iii) received from the independent
accountants written disclosure and a letter regarding
the accountants' independence, and discussed with the
accountants their independence; and
(iv) recommended to the Board that the
audited financial statements be included in the
company's Annual Report on Form 10-K.
INDEPENDENT ACCOUNTANTS
1. Recommend to the Board the selection of the
independent accountants, considering independence and
effectiveness and approve the fees and other
compensation to be paid to the independent
accountants.
2. Obtain from the independent accountants a written
statement describing all relationships between the
accountants and the company.
3. Review and discuss with the accountants on an annual
basis all significant relationships the accountants
have with the company to determine the accountants'
independence.
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4. Review the performance of the independent accountants
and approve any proposed discharge of the independent
accountants when circumstances warrant.
5. Periodically consult with the independent accountants
out of the presence of management about internal
controls and the fullness and accuracy of the
company's financial statements.
6. Consider and approve, if appropriate, actions
required to maintain the independence of the
accountants.
FINANCIAL REPORTING PROCESSES
1. In consultation with the independent accountants and
the internal auditors (if any), review the integrity
of the company's financial reporting processes, both
internal and external.
2. Consider the independent accountants' judgments about
the quality and appropriateness of the company's
accounting principles as applied in its financial
reporting.
3. Consider and approve, if appropriate, major changes
to the company's auditing and accounting principles
and practices as suggested by the independent
accountants, management, or the internal auditing
department (if any).
4. Review with the independent accountants the scope of
their annual and quarterly examinations and the
accounting principles used in conducting the
examinations.
PROCESS IMPROVEMENT
1. Establish regular and separate systems of reporting
to the Committee by each of management, the
independent accountants and the internal auditors (if
any) regarding any significant judgments made in
management's preparation of the financial statements
and the view of each as to the appropriateness of
such judgments.
2. Following completion of the annual audit, review
separately with each of management, the independent
accountants and the internal auditing department (if
any) any significant difficulties encountered during
the course of the audit, including any restrictions
on the scope of work or access to required
information.
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3. Review any significant disagreement among management
and the independent accountants or the internal
auditing department (if any) in connection with the
preparation of the financial statements.
4. Review with the independent accountants, the internal
auditing department (if any) and management the
extent to which changes or improvements in financial
or accounting practices, as approved by the
Committee, have been implemented. This review should
be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided
by the Committee.
5. Review activities, organizational structure, and
qualifications of the internal audit department (if
any).
6. Provide a focal point for communications among
non-Committee directors, the company's management,
and the independent accountants.
7. Review with independent accountants, the company's
internal auditor (if any), and financial and
accounting personnel, the adequacy and effectiveness
of the accounting and financial controls of the
company, and elicit any recommendations for the
improvement of such internal control procedures or
particular areas where new or more detailed controls
or procedures are desirable.
8. Meet with independent accountants to appraise the
effectiveness of the audit effort. Such appraisal
shall include a discussion of the overall approach to
and the scope of the examination, with particular
attention to those areas on which either the
committee or the auditors believed emphasis was
necessary or desirable.
REPORTING
1. Annually, report to the Board its activities during
the past year. This report shall discuss any specific
actions the Committee has taken as well as the
Committee's plans for the coming year. Additionally,
during the year, as appropriate, the Committee shall
report significant matters and findings to the Board.
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PROXY
TRADESTATION GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints William R. Cruz and
Ralph L. Cruz, and each of them, with full power of substitution, as attorneys
and proxies to appear and to vote all shares of common stock of TradeStation
Group, Inc. (the "Company") which the undersigned may be entitled to vote at the
Annual Meeting of Shareholders of the Company to be held at the Miami Airport
Marriott, 1201 N.W. LeJeune Road, Miami, Florida 33126, on Monday, June 18,
2001, at 10:00 a.m. (local time) and at any postponements or adjournments
thereof. The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and the Proxy Statement, each dated May 18, 2001, and
instructs its attorneys and proxies to vote as set forth on this Proxy.
(TO BE SIGNED ON REVERSE SIDE)
[X] Please mark your votes as in this example.
FOR WITHHELD NOMINEES: Ralph L. Cruz
1. ELECTION OF [ ] [ ] William R. Cruz
DIRECTORS Lothar Mayer
(PROPOSAL 1) Stephen C. Richards
FOR, EXCEPT vote withheld from the Salomon Sredni
following nominee(s): ______________________ Farshid Tafazzoli
____________________________________________ E. Steven zum Tobel
Charles F. Wright
2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S NONEMPLOYEE DIRECTOR STOCK
OPTION PLAN INCREASING THE NUMBER OF SHARES OF THE COMPANY'S COMMON
STOCK RESERVED FOR ISSUANCE UNDER SUCH PLAN FROM 175,000 TO 350,000,
SUBJECT TO ANY FURTHER ANTIDILUTION ADJUSTMENTS, AND INCREASING THE
NUMBER OF SHARES INCLUDED IN THE OPTIONS AUTOMATICALLY GRANTED TO A
NONEMPLOYEE DIRECTOR UPON EACH ANNUAL REELECTION FROM 3,000 TO 7,000
(PROPOSAL 2)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2001
(PROPOSAL 3)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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4. In their discretion, to transact such other business as may properly
come before the meeting or any postponement or adjournment thereof.
The shares represented by this Proxy will be voted as specified. IF NO CHOICE IS
SPECIFIED, THE PROXY WILL BE VOTED FOR EACH OF PROPOSALS 1, 2 AND 3 ABOVE. THIS
PROXY CARD MUST BE PROPERLY COMPLETED, SIGNED, DATED AND RETURNED IN ORDER TO
HAVE YOUR SHARES VOTED.
PLEASE NOTE ANY CHANGE OF ADDRESS.
PLEASE MAIL IN THE ENVELOPE PROVIDED.
Signature_______________________________
Date____________________________________
Signature_______________________________
Date____________________________________
NOTE: Please sign exactly as your name
appears above. Joint owners should each
sign. When signing as attorney, executor,
administrator, trustee, etc., indicate
title. If the signer is a corporation,
partnership or other entity, sign in the
corporate, partnership or other entity
name by a duly authorized representative.